Dow off 20 points yesterday. Gold down $6 an ounce. No biggie. On Monday and Tuesday, we visited our youngest son, Edward, a sophomore at the University of Vermont. His roommate joined us for dinner. “Okay, let me explain it to you,” we said. The roommate was wondering if he should switch his major to economics. “Economics is a phony science. The more you study it, the more you think you know… and the less you really know about how an economy actually functions. “I’ll explain why in just a few sentences.

The Dow took another step up yesterday. Gold held steady. Are we at the beginning of another bubble in stocks? Maybe. As Bonner & Partners editor-in-chief Chris Hunter reported yesterday, the total market capitalization of the US stock market now stands at 112% of GDP. This is higher than 96% of readings since World War II. It’s also significantly higher than the same reading in Germany (44%), in China (41%) and in Japan (62%). And the inflating of bond prices as a result of the Fed’s QE seems to be having most effect in one place: the stock market. Since the economy is NOT responding, we expect the Fed to continue…

When we left Baltimore on Friday, the Dow was still going up. Gold was still going down. The Fed was still hinting it would begin tapering its bond-buying program (QE) soon… or maybe not. The economy was still recovering… or maybe it wasn’t. And the Red Sox were still favored to win the World Series. We woke up Sunday morning in New York with a copy of the New York Times at our door. What caught our eye in the paper was the sad saga of “Obamacare.” The Affordable Care Act, to give it its official name, seems to set off emotional outbursts. Conservatives are agin’ it. Liberals are for it.

Yesterday was Hallowe’en. We saw hobgoblins … scarecrows … six-foot-tall rodents … and at least one crow that weighed 200 lbs. We also saw the Dow fall 71 points and gold lose $25 an ounce. A few days ago, investors were sure it was “QE from Here to Eternity.” Now, they’re not so sure. The Fed seemed to leave some uncertainty on the matter when it made its remarks on Wednesday. But we have little doubt. The Fed won’t be tapering in any serious way anytime soon. It is determined to increase “demand,” and the only kind of demand it knows is the kind you get from more cash and credit.